Social-justice funding plunges

Grantmaking to U.S.-based nonprofits that work for structural change to boost opportunity for the most vulnerable populations took a big hit from the collapse of the global economy in 2008 and likely will continue to suffer, a new report says.

Social-justice grants in 2009 fell to below 2007 levels, with smaller foundations posting the biggest drop, says Diminishing Dollars, a report produced by the Foundation Center on the impact of the 2008 financial crisis on social-justice funding.

Unless funders see five years of above-average investment returns, social-justice grantmaking levels in 2015 still will trail 2008 levels, says the report, which looked at 54 foundations that are active in social-justice funding and award $100 million or less a year, mainly from endowment.

“The future of social-justice philanthropy looks grim unless foundations and nonprofits working in this arena can devise ways to effectively navigate this climate,” Elizabeth Sak, executive director of the Cricket Island Foundation, which spearheaded and managed the research project, says in a statement.

The decline in social-justice funding is “particularly unfortunate,” the report says, because social-funding had been growing in the first half of the decade.

Data on funders sampled in Key Facts on Social Justice Grantmaking, a separate report from the Foundation Center, show their giving fell to $3.1 billion in 2009 from $3.7 billion in 2008.

And a third Foundation Center study, in 2009, said social-justice funding grew faster than overall giving between 2002 and 2006 and noted a “sense of optimism for the future with the start of the Obama administration,” the new report says.

Additional reasons for concern, it says, is that many of the nonprofits that seek and receive social-justice funding are small, community-based and member-led groups “working on behalf of he most vulnerable people in marginalized communities across the country.”

Those groups “play a crucial role by focusing on systems change that can have a beneficial impact on hundreds of thousands of people,” it says, yet those nonprofits also have a “small, dedicated funder base and are therefore very vulnerable to shifts in social-justice funding.

They also “often lack the capacity to compete with larger nonprofits for public funds or for funding from more ‘mainstream’ foundations as the environment becomes both increasingly competitive (due to scarce resources) and focused on scalability and outcomes.”

The report also found that foundations with less than $50 million in assets will struggle most to recover from the economic downturn.

At an average rate of return of 7 percent, it says, grantmaking levels for six small foundations studied are projected to be 17 percent less in 2015 than in 2008.

“Small foundations must spend less in grantmaking to avoid depleting their assets,” the report says. “This finding deserves particular note because of the very heavy reliance on small foundations by local, community-based nonprofits engaged in social-justice work.”

The report also says nonprofits seeking new funders will have a tough time.

In the wake of the downturn, it says, many foundations made their grant-review processes more selective, moved to a practice of not accepting unsolicited proposals, made multi-year commitments to a set of existing core grantees, and took other actions that “reduced the likelihood that organizations new to the foundation could receive funding.”

The report also says some foundations are “unintentionally depleting their endowments at a very slow rate,” a phenomenon that, combined with other the fact that other funders were spending more than they earned in the early years after the economic crisis, “may result in reduced grantmaking in the future as they take corrective actions.”